India's private gold reserves worth $550 billion

At a conservative estimate of 15,000 tonnes, India’s privately held gold reserves, at present prices, are valued at $550 billion – nearly 40 per cent of India’s stock market capitalisation of $ 1.4 trillion, reveals a report from HDFC Securities. India’s net retail investment in gold has also doubled from 90 tonnes to 200 tonnes over 2003-08 and is now a $7 billion market. HDFC Securities analyst Anupam Gupta expects that a 1 per cent shift in savings from bank deposits to gold can add 4 per cent to India’s annual gold demand.

India’s obsession with gold is well known. Accumulated over generations, India’s privately held gold reserves are estimated at 15,000 to 25,000 tonnes. At present prices, this is valued at $548-913 billion and can act as a potent driver to sustain the wealth effect in India. While jewellery remains the dominant mode of possessing gold, India’s net retail investment doubled to 200 tonnes in 2008 from 90 tonnes in 2003, reflecting a marked shift in consumer attitude towards gold as an asset, the report said

Another way to look at gold ownership in India is to compare it to annual savings patterns. Indians purchased 660 tonnes, or $19 billion, of gold in 2008, which formed an approximate 15 per cent of physical savings and 5 per cent of total savings. “This implies enough headroom for growth because attitude toward gold ownership changes from jewellery to investment. As attitudes change, we expect Indians to open up to the idea of owning gold as an investment, rather than an asset,” Gupta said.

Gold loans also present a huge opportunity. Even if banks tap 5 per cent of average private gold reserves of 20,000 tonnes, this translates to a market size of $37 billion, Gupta said. Banks and non-banking financial companies (NBFCs), such as Manappuram General Finance and Muthoot Finance are expanding their network to tap into this fast-growing and underserviced market.